Archives: 2007 August

Great Southwest Mortgage is the parent company of First Magnus Financial Corp.

According to a recorded message on a customer-service line First Magnus Financial Corp., the second-largest privately held U.S. mortgage lender, will stop funding new mortgages.

“In light of the collapse of the secondary mortgage market, First Magnus will not fund any mortgage loans after Wednesday, Aug. 15,” the message said.

First Magnus was the 16th-largest U.S. home lender in the first half of this year, making $17.1 billion in loans, according to newsletter Inside Mortgage Finance. The company is based in Tucson, Arizona.

The fallout from the debacle from the improper risk evaluation policies in the sub prime lending market, abated for so long by the easy money policies of the US Federal Reserve Bank, is far from being finished. More bad news seems to surface everyday in the announcement of companies that have stopped loan funding operations or that are filing for bankruptcy.

Great Southwest Mortgage is just another one of several of large mortgage brokerage companies to announce that they are having extreme difficulties in funding housing loans. The extend of this disaster will be huge as it tends to feed on itself.

With the interlinking of markets that has occurred in recent years the impact of trouble in the US is global. Don’t trust the governments of the world to come in and save these companies or your investments. As this type of trouble can swiftly spread throughout the banking system make sure that cash in your bank is protected by FDIC insurance. Keep in mind that the protection limit is only $100,000.

As readers of Home Loan Services know I have not optimistic at all for the housing market’s ability to weather the fierce financial storm that is now battering financial markets worldwide.

Today it was reported that for last month housing starts and permits both fell to their lowest levels in more than a decade, as the latest readings on the battered housing and home building markets came in below expectations.

Housing starts fell 6.1 percent to an annual rate of 1.38 million in July from a revised 1.47 million rate in June. Economists surveyed by Briefing.com had forecast starts would fall to a 1.41 million pace in June.

Housing starts and permits are at the lowest level in more than a decade. The boom is well over to be replaced by a bust.

Watch out below folks. With the largest mortgage brokers in the nation in serious difficulties, and with hedge funds going under, many will probably be forced into bankruptcy, this disaster is just getting started.

California is a state that often leads the nation in new trends. If that proves to be true with new home sales the nations builders are in for some tough times just ahead.

Southern California home sales hit a 12-year low as potential buyers held back on buying a house as they waited for prices to ease during the housing downturn.

The fact that a number of leading national mortgage brokerage firms have recently filled for bankruptcy is not at all helpful to the arguments of those who expect an early recovery, such as the National Association of Realtors on the payroll economists.

A total of 17,867 new and resale homes sold last month in Los Angeles, Orange, San Diego, Riverside, San Bernardino and Ventura counties, marking an 11.4 percent decline from June and down 27.4 percent from a year earlier, according to DataQuick Information Systems.

“These are interesting times because the slowdown in home sales isn’t part of a broader economic slowdown, it’s a post-frenzy re-balancing act,” said Marshall Prentice, DataQuick president.

“The last time we had sales this slow, Southern California had been in recession for a few years,” Prentice said. “Jobs were being lost in droves, people were leaving the area and home prices fell significantly. This time around we haven’t seen that.”

This time around it seems to be the fallout from the sub prime lending mortgage market that has triggered the decline in housing activity. After years of a boom the bust could turn out to be quite severe.